Eleni Giokos and Rene Vollgraaff

African governments should work on closer co-ordination of national budgets and financial systems before considering the introduction of a common currency, African Development Bank (AfDB) chief economist Mthuli Ncube said yesterday.

“To get a single currency takes a lot of fiscal co-ordination and unified banking regulations,” he said in an interview in Kigali. “There is a lot that needs to be put in place.”

The East African Community, grouping Kenya, Tanzania, Uganda, Rwanda and Burundi, says it will meet targets on inflation, fiscal deficits and public debt ratios before implementing a monetary union by 2023 and a unified currency.

The West African Monetary Zone, comprising Ghana, Guinea, Nigeria, Liberia, Sierra Leone and Gambia, is planning a similar move by next year after a decade of delays.

The eight French-speaking nations of the West African Economic and Monetary Union already use the CFA franc as a common currency, which is pegged to the euro.

Lesotho, Namibia and Swaziland are in a common monetary area with South Africa and all peg their units to the rand.

These regional arrangements precede a goal set by the AU to adopt a shared currency used across the continent and establish an economic and monetary union by 2028.

The spread of the European debt crisis had served as a lesson about the risks of accelerating currency integration, including in Africa, Ncube said.

“You can have a domino effect. South Africa is so connected globally that any rand volatility due to global issues will impact all currencies linked to it, so we already have an example of what could happen.” – Bloomberg